Cryptocurrency in simple details.

[Spongebob]

@HappySkeptic That was a very succinct explanation.

[BrianSoddingBoru4]

To paraphrase Lewis Black, nobody knows how the fuck economics works, so explain this to me: what is the advantage of a commodity-based currency over fiat currency?

Boru

For a currency to work, it has to have a limited supply, or people won't value it (or you get inflation).

For fiat currency, the limit is placed by the government.  Bitcoin has a hard limit.

There are problems with both.  With fiat currency, a government can be tempted to print too much.  With bitcoin, the limited supply incentivizes treating it as an investment and not a currency.

For any currency to work, people have to believe that it will have similar buying power a year from now that it has today.  If it goes down too much, it becomes worthless to hold, and if it goes up too much, it becomes risky to spend.

I wasn’t thinking specifically about Bitcoin - why is ANY commodity-based currency ‘better’ than a fiat currency? In the former, the value is determined by the amount of the commodity in existence. In the later, the value is determined by government decree (at least initially).


I fully understand that over-printing money can lead to inflation or even hyperinflation, but it doesn’t always. If a country has its currency tied to a commodity, an increase in the amount of that commodity will devalue the currency.

So, what’s the advantage of one over the other?

Boru

[HappySkeptic]

It's about 2 things - trust, and the government's ability to change the money supply to avoid economic shocks.

Gold is best for trust, but it doesn't allow governments any economic control.

[BrianSoddingBoru4]

It's about 2 things - trust, and the government's ability to change the money supply to avoid economic shocks.

Gold is best for trust, but it doesn't allow governments any economic control.

So, there is no real advantage of one over the other? Thought as much.

Boru

[Brian37]

"Currency" is artificial. Long before our species put value on metals like gold , we were nomadic and naked 200,000 years ago. Our socializing over time lead us to form groups. In that our first "currency" was food and territory. I find gold and diamonds and even "bitcoin" all bullshit scams which all amount to justification to control resources. 

But regardless, no matter what "transactional" model humans come up with, we will always be a social species. I'd argue the biggest scam humans intentionally and unintentionally inflict on each other is religion. "The promise of an impossible utopia".

[BrianSoddingBoru4]

"Currency" is artificial. Long before our species put value on metals like gold , we were nomadic and naked 200,000 years ago. Our socializing over time lead us to form groups. In that our first "currency" was food and territory. I find gold and diamonds and even "bitcoin" all bullshit scams which all amount to justification to control resources. 

But regardless, no matter what "transactional" model humans come up with, we will always be a social species. I'd argue the biggest scam humans intentionally and unintentionally inflict on each other is religion. "The promise of an impossible utopia".

Currency is not artificial. What a stupid thing to say. Currency is a means by which the barter system keeps you from having to exchange a wheelbarrow full of turnips for a load of bread.

Boru

[Brian37]

"Currency" is artificial. Long before our species put value on metals like gold , we were nomadic and naked 200,000 years ago. Our socializing over time lead us to form groups. In that our first "currency" was food and territory. I find gold and diamonds and even "bitcoin" all bullshit scams which all amount to justification to control resources. 

But regardless, no matter what "transactional" model humans come up with, we will always be a social species. I'd argue the biggest scam humans intentionally and unintentionally inflict on each other is religion. "The promise of an impossible utopia".

Currency is not artificial. What a stupid thing to say. Currency is a means by which the barter system keeps you from having to exchange a wheelbarrow full of turnips for a load of bread.

Boru

It is artificial. Prior to paper and metal, our species traded food, animals and even children. 

I wish you would stop stupidly assuming we are in disagreement. I think you simply love disagreeing with me just to do so. 

In sports every sport has different scoring schemes. In the NFL a score or "touchdown" is worth 6 points prior to extra point. In soccer a score is worth 1 point. In Tennis the first point is 15.  But all of those themes represent one completion of a score. 

Yen represents Japanese Currency. Euro represents European currency. 

Our species existed long before our creation of paper currency and coins. Just like we existed before the NFL, MLB,  Pro soccer or golf.

[Spongebob]

The value of money is an artificial thing. It only works if everyone agrees that a dollar bill is worth having & trading. In times past when there was no single US currency but rather local and state currencies, the value of a bill was different depending on where you try to spend it because it wasn't universally redeemable.

Even precious metals aren't an absolute value. In the past, some countries experienced inflationary pressures even when using gold/silver currency.

There are still people in the US who want to go back to a gold standard but they are a very small niche.

[BrianSoddingBoru4]

Currency is not artificial. What a stupid thing to say. Currency is a means by which the barter system keeps you from having to exchange a wheelbarrow full of turnips for a load of bread.

Boru

It is artificial. Prior to paper and metal, our species traded food, animals and even children. 

I wish you would stop stupidly assuming we are in disagreement. I think you simply love disagreeing with me just to do so. 

In sports every sport has different scoring schemes. In the NFL a score or "touchdown" is worth 6 points prior to extra point. In soccer a score is worth 1 point. In Tennis the first point is 15.  But all of those themes represent one completion of a score. 

Yen represents Japanese Currency. Euro represents European currency. 

Our species existed long before our creation of paper currency and coins. Just like we existed before the NFL, MLB,  Pro soccer or golf.

And that’s what currency IS you knucklehead - a placeholder for the value of goods and services exchanged.

Suppose you buy something (call it a widget) that costs $20. In addition to $20 being worth one widget, it is also worth 250 doohickies. What’s easier - carrying a $20 to Widgets R Us, or carrying 250 doohickies?

Jaysus wept, you can be thick.

Boru

[BrianSoddingBoru4]

The value of money is an artificial thing.  It only works if everyone agrees that a dollar bill is worth having & trading.  In times past when there was no single US currency but rather local and state currencies, the value of a bill was different depending on where you try to spend it because it wasn't universally redeemable.

Even precious metals aren't an absolute value.  In the past, some countries experienced inflationary pressures even when using gold/silver currency.

There are still people in the US who want to go back to a gold standard but they are a very small niche.

I’d say the value of money is ‘fluid’ rather than ‘artificial’. What people are willing to pay for something changes, so the value of money changes. But the idea that money has value is intrinsic.

Boru